Which strategy involves purchasing two types of annuity contracts: immediate and deferred?

Which strategy involves purchasing two types of annuity contracts: immediate and deferred?

• A. Split Annuity Strategy
• B. Structured Settlement Annuities
• C. Participating Annuity
• D. Indexed Annuity Payments

Answer: (A)

This is the split annuity strategy. It combines two types of contracts to manage income timing: one that starts paying immediately and another that defers payments to a future date. An immediate annuity turns a lump sum into a guaranteed, regular income right away, which helps cover current expenses and reduces longevity risk. A deferred annuity allows money to grow on a tax-deferred basis and then begin payments later, providing funds for future needs. Using both together gives a stable income now while preserving growth and flexibility for later, which is why this approach fits the question. Structured settlement annuities are used to fund settlements with scheduled payments, not specifically to pair immediate and deferred contracts for retirement planning. Participating annuities involve dividends or surplus sharing from the insurer, which is a different feature. Indexed annuities tie crediting to an index’s performance, but again do not describe mixing immediate and deferred contracts.

This is the split annuity strategy. It combines two types of contracts to manage income timing: one that starts paying immediately and another that defers payments to a future date. An immediate annuity turns a lump sum into a guaranteed, regular income right away, which helps cover current expenses and reduces longevity risk. A deferred annuity allows money to grow on a tax-deferred basis and then begin payments later, providing funds for future needs. Using both together gives a stable income now while preserving growth and flexibility for later, which is why this approach fits the question.

Structured settlement annuities are used to fund settlements with scheduled payments, not specifically to pair immediate and deferred contracts for retirement planning. Participating annuities involve dividends or surplus sharing from the insurer, which is a different feature. Indexed annuities tie crediting to an index’s performance, but again do not describe mixing immediate and deferred contracts.